SNK - MARKET UPDATE

30 October 2017

Snakk Media - Business Update for the period 1 July to 30 September 2017 General Commentary and Review:

The Board and Management of Snakk Media present the Quarter 2 Business Update for the 2018 Financial Year.

The Gross Margin remains consistent at 59% and is in line with the FY18 target of 58%.

The Compensation to Revenue ratio for Q2 is 37% which is lower than the FY18 target of 42%. The benefits of the re-structuring in March have been realised over the 1st half and combined with natural attrition and further re-structuring in Q2 total compensation is lower year on year to 30 September and as a proportion of revenue. Together with the lower personnel costs operating expenses for the 1st half year are lower by 22%.

Revenue year on year to 30 September is higher by 13% which has also contributed to the low compensation to revenue ratio.

The Board and Management believe the compensation to revenue for FY18 will be within the stated KOM target by year end.

Staff Turnover for Q2 was 11%, which is in line with the annual projected turnover target. Based on anticipated staff turnover and planned staff movements for the remainder of the year the Board and Management believe the staff turnover for FY18 will remain within the stated KOM target.

The Click-Through rate remains consistent and within expectations.

Performance against Key Operating Milestones:

Key Operating Milestone (KOM)

Q1 FY18

Q2 FY18

YTD FY18

FY18

Target

Q2 FY18

Target Variance

Gross Margin %

57%

59%

58%

58%

1.3%

Compensation to Revenue Ratio %

44%

37%

41%

42%

11.6%

Staff Turnover %

12%

11%

23%

33%

-2.6%

Click-Through Rate %

0.97%

0.98%

0.97%

0.97%

0.01%

SNAKK MEDIA LIMITED [SNK]

In the directors' opinion, Snakk Media Limited's (the "Company") key operating milestones, taken together, address the most significant factors by which the performance of the Company's business should be assessed and monitored and will result in understandable reporting for investors and therefore meet the NXT standard.

Dated: 30 October 2017

Peter James Director

Signature

Martin Riegel Director

Signature

AUTHORITY FOR THIS ANNOUNCEMENT

Name of senior manager or director

authorised to make this announcement

Joel Williams

Chief Executive Officer

Contact for enquiries

Heidi Aldred

Group Company Secretary

Contact Phone Number

+64 9889 2616

Contact email

investors@snakkmedia.com

Date of release

30 October 2017

Future Events and Business Update Timetable

Half Year Preliminary Due Date

30/11/2017

Interim Report Due Date

31/12/2017

Q3 Business Update Due Date

31/01/2018

Snakk Media shares can be traded on the NXT Market (Ticker Code: SNK).

Snakk Media is required to disclose information under the NXT Market Rules. Information about the NXT Market and Snakk Media is available at www.nxt.co.nz or from the company's website at www.snk.co.nz

KOM Calculation Methodologies:

GROSS MARGIN Gross margin is the percentage of total revenue that Snakk retains after incurring the direct costs associated with producing services sold (Direct Media Costs).

Maintaining and growing Gross Margin allows a higher percent of revenues to be spent on other business operations, such as R&D, technology, marketing and expansion into new markets / territories. As the company grows, a stable Gross Margin will drive the delivery of positive EBITDA. Direct Media Costs are the costs of the advertising inventory that Snakk onsells to its clients.

Snakk's strategy to maintain and grow Gross Margin includes:

  • utilising increasingly sophisticated and efficient technologies to purchase advertising inventory cost-effectively without compromising quality; and

  • maintaining premium product pricing by delivering strong results for advertisers, combined with product offerings that are underpinned by unique and innovative ad technologies.

    It is calculated as follows:

    Gross Margin % = Total revenue less Direct Media Costs

    Total revenue

    COMPENSATION TO REVENUE RATIO Compensation to revenue ratio is the percentage of permanent full-time employee salaries within Snakk's operating divisions compared to total revenue.

    The company's main cost outside of Direct Media Costs (being the costs of the advertising inventory that Snakk onsells to its clients) is staff salaries across its various divisions, particularly sales, marketing and management. Measuring the relationship between revenue and compensation figures within a period provides a method to monitor how well the business is utilising its human resources to generate revenues.

    The efficiency or scale of a labour force increases as the labour-to-revenue ratio decreases, which is why a lower ratio is better for the company. Comparing the ratio against the company's historical records can show if the labour force efficiency is deteriorating, improving or being maintained at the same level over a period of time.

    Snakk's strategy is to lower the Compensation to Revenue Ratio over time using a combination of the following:

  • automating current manual and people-driven processes;

  • remunerating staff in innovative and progressive ways;

  • utilising technologies to drive operational efficiencies;

  • managing staff headcount closely if revenue growth is too slow or other market conditions change in an adverse way; and

  • increasing the proportion of staff located outside Australia. It is calculated as follows:

Compensation to Revenue Ratio % =

Total permanent full-time employee salaries

Total revenue

Snakk Media Ltd. published this content on 30 October 2017 and is solely responsible for the information contained herein.
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